You're right. I should have tested it before posting. But the same expression is recognized by Pro 1.4 Alpha. So a workaround for now can be to author the label in Pro and then publish it. Maybe a support case can be filed to let esri know TextFormatting.NewLine is not working on ArcGIS Online?

Just to clarify, TextFormatting.NewLine is supported in Arcade from a language perspective. The problem you are seeing is related to the fact that currently ArcGIS Online does not support multi-line labels; that is independent of the labeling syntax.

YES! Please make the Arcade new line functions work in ArcGIS Online! I have come across multiple occasions where it would be useful. It is especially frustrating when the "Test" in the editing window shows multiple lines only to have a single line display in the map.